April 25 (Bloomberg) -- Even as car sales across Europe
have plummeted in recent years, automakers could count on
Germans to buy with little discounting. Now, at least one dealer
is resorting to Groupon Inc. coupons to boost sales.

AK Autoport Koeln GmbH, a dealer in the western city of
Cologne, is offering a 99-euro ($130) Groupon voucher entitling
buyers to a discount of 5,450 euros on a 2013 Ford Fiesta -- a
price break of about 32 percent.

Auto discounts in Germany, which accounts for more than one
in five car sales in Europe, climbed to their highest level in
seven years in April, sapping profit margins for manufacturers,
according to a monthly index by the Center for Automotive
Research at the University of Duisburg-Essen.

“At the moment, nothing points to an easing of the
discount situation,” said Ferdinand Dudenhoeffer, the center’s
director. “Cars that couldn’t be sold in southern Europe are
being pushed to Germany.”

Volkswagen AG, Europe’s largest carmaker, yesterday
reported a 26 percent drop in first-quarter operating profit.
Daimler AG said weaker results at Mercedes-Benz caused earnings
before interest and taxes to tumble 56 percent. The declines
show that the effects of Europe’s sovereign-debt crisis have
spread beyond countries pushing through austerity measures.

“We are not out of the crisis in Europe,” Daimler Chief
Financial Officer Bodo Uebber told reporters yesterday. “This
is weighing on investments and consumer behavior.”

German carmakers had largely been insulated from Europe’s
slump by a stable domestic market and strong operations in the
U.S. and China. Those defenses are weakening after German car
sales dropped 13 percent in the first three months of 2013.

Sluggish Germany

“Markets were sluggish, especially in Europe, and not
least in Germany” during the quarter, VW Chief Executive
Officer Martin Winterkorn said yesterday.

Volkswagen will provide an update on its effort to sidestep
the European slowdown and become the world’s largest carmaker at
its annual shareholder meeting today in Hanover.

Ford Motor Co.’s European pretax loss more than tripled to
462 million euros in the first quarter as the U.S. automaker
moves to eliminate 6,200 jobs and close three production sites
in the region. Ford’s cuts are part of industrywide plans to
shut five plants.

Automakers will likely build 18.7 million cars in Europe
this year, while factories in the region are capable of making
as many as 26.1 million, according to researcher IHS Automotive.
The risk is that manufacturers will continue producing to keep
equipment and staff busy. Getting rid of those vehicles may
entail deep discounts.

Police Vehicles

“Pricing in Europe is one of the biggest risks,” said
Frank Biller, an analyst at LBBW in Stuttgart, Germany. “If the
market continues to be difficult and one company starts cutting
prices further, competitors might have to follow.”

In a sign of the tension in the industry, about a dozen
police vehicles surrounded the main gate of the Paris
headquarters of PSA Peugeot Citroen during its annual meeting
yesterday, and shareholders had to use a side entrance.

Peugeot, Europe’s second-largest carmaker, reported
yesterday that first-quarter sales fell 6.5 percent to 13
billion euros. The company is eliminating 11,200 jobs in France
and closing a factory near Paris, where workers have staged
strikes over the restructuring plans.

CFO Jean-Baptiste de Chatillon said Peugeot has managed to
ease pressure to cut prices by reducing inventories. The French
manufacturer and its dealers had 414,000 cars in stock at the
end of the first quarter, the equivalent of 58 days of supply.
That compared to 548,000, or 70 days, a year ago.

Weeks’ Reflection

Still, Peugeot and rival Renault SA had the highest
incentives in Germany last month, with dealer discounts
averaging 15.1 percent off the list price, according to trade
publication Autohaus PulsSchlag. Industrywide incentives in
Germany rose in March to an average of 12 percent from 11.1
percent a year ago, according to PulsSchlag.

The situation is similar in France, where sales tumbled 15
percent in the first quarter, according to ACEA, a European
auto-industry trade group.

“Customers now need two weeks of reflection and try to
negotiate the price three times before making their decision,”
said Ayache Faycal, a salesman at a VW dealership in northern
Paris. On top of the tough negotiations, “we have far fewer
people coming into the store.”

Fiat Ragtop

In Italy, where car sales this year may fall to the lowest
since 1996, Fiat SpA is offering the convertible version of its
500 subcompact for the same price as the standard hard-top, the
equivalent of a 3,500-euro discount. And General Motors Co.’s
Opel is topping up other current promotions with a 1,000-euro
rebate check.

In Germany, Autoport Koeln, which sells cars from various
brands that it imports at a discount from dealers in other
countries, turned to Groupon to widen its customer base and sell
some of the Ford Fiestas it has in inventory. With more than a
day remaining on the Groupon deal yesterday, it had sold 11 of
the cars.

“Customers are certainly looking at the price,” said
Fabian Schmidt, sales manager at the dealership. “But you can
sell cars in this market if you offer the right deals.”